Louisiana Disputes a Bill From FEMA for Hurricane Aid

By LESLIE EATON

Published: December 7, 2006

Who should pay for the federal government's mistakes in handing out disaster aid to the wrong people? Not Louisiana, say state officials, who have gone to court to try to prevent the Federal Emergency Management Agency from collecting about $60 million from the state.

The federal government has asked a judge to dismiss the lawsuit, contending that Louisiana cannot refuse to pay charges it disagrees with, even when the charges are the result of fraudulent claims, and that the state has no right to audit FEMA's spending. A hearing on the lawsuit is scheduled for Monday in Federal District Court in Baton Rouge.

Not long after Hurricanes Katrina and Rita hit last year, government and private watchdogs complained about the slowness of FEMA's response and the agency's poor control over its spending. On Wednesday, the federal Government Accountability Office reported that FEMA had made about $1 billion in improper or fraudulent payments but had recouped a tiny fraction of the money.

While the federal government covers the costs of some disaster-relief programs, like housing assistance, it requires states to contribute to others, including the one at the center of Louisiana's dispute. That program, called ''other needs assistance,'' pays for a variety of victims' expenses, like transportation, dental bills and funeral costs.

States that ask the federal agency to administer the program, as Louisiana did, are required to reimburse the federal government for 25 percent of the other needs payments, which in the year after Hurricanes Katrina and Rita topped $1.5 billion, according to court filings. FEMA says it credits states for any improper payments that it recovers.

Louisiana was billed about $384 million and has paid about $320 million. It has deposited the disputed $60 million into a court account.

The disputed figure includes $45 million withheld because the state estimates that about 12 percent of FEMA's other needs spending went to people who were probably not eligible for it. The estimate is based on a sample of payments examined by the office of Steve J. Theriot, Louisiana's legislative auditor. The auditor's office found problem payments among 425 cases it reviewed, according to its Oct. 17 report to the Legislature.

Nine payments went to people who claimed to live in houses that, neighbors or owners said, were unoccupied at the time of the storms, the report said. One payment was sent to someone who did not apply for it and had previously been a victim of identity theft; another was made to someone who claimed to live in a subdivision that had not been built. In many cases, the auditors could not verify that people lived at the addresses they claimed.

Mr. Theriot said some of his counterparts in other states were watching the Louisiana case closely because of their own concerns about FEMA payments.

In January, William O. Monroe, Florida's auditor general, issued a report noting that the federal agency had paid too much to people who said their cars were destroyed by hurricanes in 2004. Mr. Monroe recommended that Florida take stronger steps to ensure that its reimbursements to FEMA were for valid obligations.

Aaron T. Walker, a FEMA spokesman, said in an e-mail message that the agency does not comment on litigation. In the past, Louisiana has paid its share of the other needs assistance, Mr. Walker added.

In court papers, lawyers for the federal government said that requiring the agency to use ''labor intensive, detective-style techniques such as interviewing the neighbors and landlords of applicants'' would cripple the aid program.

The rest of the contested money, about $15 million, is the state's share of money that FEMA paid to reimburse people who bought generators. The federal agency says the state approved such payments; the state says it did not.

Louisiana had a budget surplus of more than $800 million in its last fiscal year, and is running an even larger surplus this year.

But to state officials, ''this is about transparency, accountability and, I guess, in a sense, reciprocity,'' Mr. Theriot said, explaining that when the federal government gives grants to the state, federal auditors can examine the state's spending and, if they find a problem, demand the money back.

Louisiana wants the same rights when FEMA is spending the state's money, Mr. Theriot said.

''Why should we pay 25 cents on the dollar,'' he asked, ''for errors from making payments to noneligible recipients?''